1995 (7) TMI 64 - SC - Benami Property

Whether the prohibition to file a suit or to take up a defence in respect of a benami transaction imposed by section 4 of the Benami Transactions (Prohibition) Act, 1988 applies to a benami transaction of purchase of property by a person in the name of his wife or unmarried daughter? Held that - Since the plaintiff is the husband who had the right to enter into a benami transaction in the matter of purchase of property in the name of his wife or unmarried daughter, as we have held earlier, he is entitled to enforce his rights in the properties concerned if he can succeed in showing that he had purchased them benami in the name of his wife. But in view of the statutory presumption incorporated in sub-section (2) of section 3 of the Act, he can get the relief sought in the suit only if he can prove that the properties concerned had not been purchased for the benefit of the wife, even if he succeeds in showing that the consideration for the purchase of the properties had been paid by him. Allow this appeal, set aside the order of the Division Bench of the High Court, uphold the order of the learned single judge rejecting the application of the defendant-wife for rejection of the plaint, and remit the suit to the Delhi High Court for disposal according to law and in the light of this judgment.

Summary

Issues:
Interpretation of Section 4 of the Benami Transactions (Prohibition) Act, 1988 regarding filing of suits or taking defenses in benami transactions involving property purchased in the name of a wife or unmarried daughter.

Analysis:
The Supreme Court addressed the issue of whether the prohibition under Section 4 of the Benami Transactions (Prohibition) Act, 1988 applies to benami transactions where property is purchased in the name of a wife or unmarried daughter. The Court referred to previous judgments and highlighted that the prohibition under Section 4 applies only to transactions made after the Act came into force, not to those already pending. The Act prohibits suits or defenses in cases of benami transactions, except in specific situations outlined in sub-sections (3)(a) and (b) of Section 4.

The Court examined the definitions and provisions of Sections 3 and 5 of the Act to determine the scope of applicability of the prohibition under Section 4. Section 3 prohibits benami transactions, but an exception is made for property purchased in the name of a wife or unmarried daughter. The Court reasoned that if a person is allowed to purchase property in the name of their wife or daughter under Section 3(2), the prohibition under Section 4 should not apply to such transactions. The Court emphasized that enforcing rights acquired through such transactions should not be prohibited, as it would contradict the purpose of the Act.

In the specific case before the Court, the plaintiff had filed a suit regarding properties allegedly purchased benami in the name of his wife. The defendant sought rejection of the plaint under Section 4, but the single judge rejected the application. The Division Bench of the High Court overturned this decision, prompting the appeal to the Supreme Court. The Court ruled that the plaintiff, being the husband who entered into a benami transaction, could enforce his rights if he proves the properties were not purchased for the wife's benefit, despite the statutory presumption.

In conclusion, the Supreme Court allowed the appeal, set aside the High Court's decision, upheld the rejection of the defendant's application, and remitted the suit for further proceedings in light of the judgment. The Court clarified that filing suits or taking defenses in past or present benami transactions involving property purchased in the name of a wife or unmarried daughter is not prohibited under Section 4 of the Act.